The Latest Burst of Inflation in the U.S. Is Probably Transitory
The Cleveland Fed says five-year inflation expectations are still just 1.5% a year.
Inflation hawks are exasperated that Federal Reserve policymakers such as Fed Governor Lael Brainard continue to say the current burst of inflation is probably “transitory”—as Brainard did once again on June 1 in a videoconference hosted by the Economic Club of New York. They worry that the Fed is falling behind the curve, losing control of the narrative, and allowing expectations of high inflation to become embedded in the minds of consumers, businesspeople, and players in the financial markets.
But maybe inflation expectations really aren’t rising so fast. Maybe those consumers, executives, and traders are looking through the short-term noise and perceiving, correctly, that inflation is likely to settle back down to a modest pace in the years to come. Take a look at the two lines in this chart: